AIG hearing to include Paulson, Friedman testimony

WASHINGTON (BestGrowthStock) – Former U.S. Treasury Secretary Henry Paulson and ex-New York Fed Chairman Stephen Friedman will testify at a congressional hearing on bailed-out insurer AIG’s payments to banks, a committee aide said on Tuesday.

Jenny Thalheimer Rosenberg, a spokeswoman for the U.S. House of Representatives Oversight and Government Reform Committee, said Paulson and Friedman accepted an invitation to testify on Wednesday on the matter from the panel’s chairman, Rep. Edolphus Towns.

Paulson and Friedman, both former longtime executives and chairmen at Goldman Sachs Group, were considered among key figures in American International Group’s government bailout in the fall of 2008, along with current Treasury Secretary Timothy Geithner, who was president of the New York Fed at the time.

Geithner also will appear before the panel.

The committee aims to examine whether new documents made public in recent weeks show that the New York Fed used undue influence to suppress the public disclosure of information about AIG’s payment of about $62.1 billion in taxpayer funds to large banks to retire credit default swaps.

Goldman Sachs received $14 billion of those payments, and at the time, Friedman also sat on Goldman’s board. In December of 2008 he bought a large block of Goldman stock.

Some U.S. lawmakers have labeled the payments a “back-door bailout” of Wall Street and foreign banks.

Paulson worked closely with Geithner — who succeeded him a year ago — and Fed Board Chairman Ben Bernanke to cobble together the AIG bailout, which started with an $85 billion Fed loan in September 2008 and later grew to more than $180 billion. The bank payments were negotiated in late October and early November.

Rep. Darrell Issa, the Oversight and Government Reform Committee’s top Republican, has doggedly pursued an investigation of the payments and circumstances surrounding their disclosure. In a report to the committee, he said the Fed “fought to cover up” details of the payments, directing its attorneys to edit AIG’s filings with the Securities and Exchange Committee to make them more difficult to understand. The Fed also “likely wasted” billions of taxpayer dollars by paying par value to banks for securities backing the AIG derivative contracts, he charged.

“The secrecy, concealment and lack of transparency in the Federal Reserve’s actions have important implications for the continued health of democracy and free markets,” Issa, of California, wrote in his report.

Issa’s probe and the new documents also have prompted a watchdog for the U.S. bailout program to launch two separate investigations of the New York Fed’s actions related to the bank payments. Neil Barofsky, the special inspector general of the Treasury’s $700 billion Troubled Asset Relief Program, announced the probes in prepared testimony to the committee.

Stock Market Money

(Reporting by David Lawder; Editing by Dan Grebler)

AIG hearing to include Paulson, Friedman testimony